Compass Business Finance indicates way out of UK investment malaise

Engineering and manufacturing businesses can always find reasons not to invest, it just seems there are more than usual at present: interest rates remaining stubbornly high, increased employer NI contributions, ongoing global conflicts, trade wars…the list goes on. And yet despite the dip in confidence prompted by this uncertainty, Compass Business Finance feels the desire to invest in capital equipment remains.

“At the recent Southern Manufacturing exhibition in Farnborough, badge scanning data says our stand registered in the top 5% for visitor numbers, which tells its own story,” reveals Danny Plows (pictured), Finance Specialist at Compass. “In terms of suppliers to the engineering and manufacturing sectors, most of those we spoke to at the show said they were busy quoting, but with lower order conversion rate. We’re trying to help both machine users and suppliers by offering innovative and bespoke finance solutions to the engineering sector that help bridge the impasse and ultimately result in machine investment.”

Lender and broker

Compass Business Finance is a rare entity: an independent finance company that operates as both a lender of its own money and a broker to ensure borrowers always get the best option available.

“For many engineering businesses, finance is a topic that’s out of their comfort zone,” says Danny Plows. “We help them navigate the financial landscape, making the process as straightforward as possible by removing all unnecessary complexities.”

Compass Business Finance offers further market differentiation by focusing on a handful of specialist industries, one of which is engineering. The company goes out of its way to understand the many idiosyncrasies of the engineering market, an activity that helps it provide optimal funding solutions in the most tax-efficient way. Compass can help with investing in machinery, equipment or plant improvements through a broad range of finance products. It can also restructure existing debts to release capital for larger projects, or help reduce monthly outgoings to improve cashflow.

“Key here is our relational rather than transactional approach to doing business,” he says. “Lending decisions should be about far more than scrutinising figures on a spreadsheet. Yes, it’s necessary to know the company’s financial performance, but we also like to understand the business and its people, the rationale for the investment and how it will generate revenue. Customer communication is paramount from the outset.”

Machine tool knowledge

He suggests engineering companies looking to invest should engage with a lender that actually knows a thing or two about assets like machine tools – what they do and how they can attract more business. Compass attends major exhibitions in the UK and Europe to broaden its awareness of the latest advances in machine tools and other manufacturing technologies. The company and its 30-strong team also engages proactively with associations like the MMMA and MTA about tailoring its services and support for the sector.

“We try to offer options that are not widely available at High Street banks, such as low-start payments, seasonal payments or stage payments with smaller or sometimes even no payments at the start of the agreement.”

Guaranteed success

Another option open to clients of Compass Business Finance is the Growth Guarantee Scheme (GGS) provided by the state-owned British Business Bank. The GGS helps businesses to grow by providing access to funding they might otherwise struggle to secure.

“We use the GGS in circumstances where we need additional security,” explains Danny Plows. “In a recent example, an engineering client was buying a machine from Italy, where it’s purchase price was different to its value on the UK market, creating a deficit. We used the GGS to mitigate that gap. We’ve also used it when the customer’s financials were showing a loss, however they had a good rationale for the investment and a strong future pipeline of business, having just won a new contract. A High Street bank would probably say no, but we can take advantage of the GGS to guarantee up to 70% of the loan and agree the finance at a fair rate.”

Unlocking investment

The potential for investment in the engineering and manufacturing sectors is vast and Compass Business Finance is working hard to unlock it for the betterment of its customers and UK industry as a whole.

“If a manufacturer engages with the right finance partner, there’ll only be one direction of travel: up.”